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What is an Irrevocable Life Insurance Trust (ILIT)?


There basically two types of ILITs. One is a single life insurance trust. This trust is designed to insure the life of one person.  The other type is a second-to-die insurance trust which is designed to insure the joint lives of two individuals (usually a husband and wife).  As the name suggests, a second-to-die ILIT pays when the survivor of the pair passes away.

Tax Advantages

A great advantage of an ILIT is the ability to structure it in a way that protects the assets of the ILIT from being included in the insured’s gross estate for federal tax purposes. The second-to-die ILIT can also protect the life insurance proceeds from inclusion in the surviving partner’s estate.  Life insurance proceeds could potentially be a large percentage of the estate so protecting it from inclusion can make a significant difference in staying under the federal estate tax exemption.

In order to fully benefit from the tax benefits, the ILIT must be structured such that the insured’s do not hold any incidents of ownership over the insurance policies in the trust.  If they don’t hold any ownership or incidents of ownership, then the proceeds will not be included in the gross estate of either individual.

Getting Legal Help

Experienced Estate Planning Attorney Elga Goodman will help you create an estate plan including trusts which protect your assets, your goals, and your loved ones. Contact us today at 973-841-5111.

Posted in: Estate Planning, New York Estate Planning